Reluctantly touching the third rail of the American waterfront.
I looked up the common idiom of ‘touching the third’ rail this week.Yourdictionary.com explains it like this: The electrified rail that runs besides, or between train tracks to power electric trains. (by extension) anything that is dangerous to come into contact with, or is best avoided. Social security is the third rail of American politics: touch it and your political career dies. I suppose that on the domestic waterfront, our version of that saying probably refers in some way to the Jones Act.
Another old adage says that if you write a column and in its choppy wake, everyone is unhappy with you about something, then, at the same time, you’ve probably done a pretty good job. I don’t know if that is true, but I have a feeling that this could be one of those times. Another old saying is that the Jones Act – that very American form of ocean cabotage – is a little like a certain brand of processed meat stick – either you love it or you don’t. There’s no in-between. I actually disagree with that part.
It wasn’t too long ago that I had a new writer begin to contribute in my magazine titles. Not necessarily a maritime subject matter expert, she is nevertheless a good investigative journalist and one who can connect the dots when it comes to a good business thread. I had to laugh when she said to me, early on, somewhat tongue-in-cheek, “You just can’t have a maritime story without mentioning the Jones Act, can you?” Sure, you can! Nevertheless, the topic certainly does come up an awful lot, and for a variety of very good reasons. And, although all of the foregoing is perhaps of only passing interest, it is also clear that I am stalling before I get to the point. After all, no one wants to touch that third rail.
Today’s Jones Act discussion, like any good onion, has many layers. That’s probably why we, as an industry, (often) fail to get out the good news about what we do, why it is important and why the general public should care. In its purest form, the Jones Act says simply that all cargo and passengers carried between two domestic points should be carried by an American built, manned and owned vessel. For the record, I am a staunch supporter of the Jones Act. I also have my opinions, in no particular order, about certain points of disagreement.
- Cargo Preference:
If the United States government has the benevolence to send aid cargo – in whatever form – to any other place on the planet, then that cargo ought to be carried on an American hull. If no suitable U.S. hull is available, then and only then should the cargo be offered to registered tonnage. Sure, a theoretically more expensive domestic charter might lighten the amount of aid cargo that gets sent out, but those are U.S. tax dollars being spent. U.S. mariners, operators, shipyards and taxpayers ought to see some benefit from those handouts. That’s got little to do with the Jones Act. On the other hand, it has everything to do with the most generous country in the world – by a wide margin – and its ability to maintain what makes all of that possible.
As the nation enters the previously unfamiliar territory of exporting crude oil to new markets, it is a happy time for many. The new freedom lowers the trade deficit; it has created thousands of jobs at home as infrastructure – particularly LNG – is ramped up to allow for that, and significant tax revenues are generated. In other words: a ‘win-win’ for everyone. On the other hand, the drumbeat of calls to require a certain percentage of that trade to be carried on U.S. bottoms simply baffles me. Maritime union leadership of course gives it lip service, but that’s what their membership pays them to do.
This, too, has nothing to do with the Jones Act, and if these laws are enacted, they would have the singular impact of stopping all of this trade in its tracks, just as it is gathering steam. This is private industry; not government cargoes. LNG is a perfect case in point. It would cost at least twice as much to build a U.S. flag LNG carrier in this day and age, and even if we started tomorrow, we’d be more than two years away from putting one on the water. And, will U.S.-produced LNG carried on that expensive hull be competitive in the international markets? The analysts say no.
- Maritime Security Program (MSP):
Wouldn’t it be nice if just one of the nation’s Maritime Security Program (MSP) vessels – the 60 or so militarily-useful vessels paid a subsidiary of $3.1 million annually for making themselves available to the U.S. government in times of need – was actually built here in the United States? That’s a pipedream, I guess. But, that’s a lot of money. Is it that expensive to reflag to the United States? And, are the operating differentials also that much? Someone school me, please.
One thing is for sure: the slots are always filled and people readily reflag and make tonnage available in order to collect those subsidies. So, it must be a good deal. Here’s an idea: If legislators can draw up bills to ensure that “x percent of energy export cargoes are carried on a U.S. bottom,” then we can do the exact same thing for the Maritime Security Fleet with a U.S.-build clause. I won’t hold my breath.
- CBP Ruling:
The recent CBP notice calls for the revocation of unlawful letter rulings of the Jones Act in accordance with 19 USC § 1625. Specifically, this impacts foreign register tonnage doing work in the U.S. Gulf of Mexico, especially those transferring merchandise from once domestic point to another. Critics – mostly those foreign-flag operators doing the work today – claim that that it will make those operating in this field less safe. But, as OMSA President Aaron Smith said recently, “Because they have no standing to attack on the capacity front, they are purposefully confusing this as a safety issue for heavy-lift capacity, which is not affected by the CBP’s ruling.”
Smith is right: the oil industry isn’t going to come to a grinding halt, especially with a robust domestic fleet of shiny, new, high tech vessels waiting in the wings. Shane Guidry, for example, continues to crank them out over at Harvey Gulf. The CBP notice is long overdue, there is ample U.S. tonnage available with which to do this work, and I hope that once CBP has gone through the comments and rendered their judgment (due May 18), that the final ruling changes current practices in the U.S. Gulf.
- Repairs and Shipyard Work:
If there is one aspect of Jones Act rulings and actual practice that irritates me, then it is the habit of Jones Act protected vessels fleeing to cheap foreign yards for repair work. Today, and as the noose on ballast water treatment (BWT) retrofits tightens on shipowners everywhere, I am told that virtually every U.S. owner required to install the equipment will likely do it overseas. And, it wasn’t too long ago that now defunct-Horizon Lines had planned to repower its aging fleet to comply with local environmental standards – reportedly at foreign yards, as well.
To my mind, if you want Jones Act protections, then you should expect to service your tonnage in American yards. The concept of maintaining a strong shipyard base through the Jones Act extends well after the champagne bottle is broken across the bow of the vessel at its christening. In between the boom-and-build cycles, those yards need something to do. You say that’s not your problem? Yes, it most certainly is. That’s what loopholes are all about, I guess. This one should be closed, or, as a minimum, significantly tightened.
- Keeping up with the Jones (Act) family
Some 1,300 words later, I have no doubt but that anyone who might read this column will be mad at me for something. That’s the nature of the beast. Don’t worry: my can of hackneyed phrases is finally empty. That said; you can support the Jones Act without demanding ridiculous things that have nothing to do with it. At the same time, those afforded cabotage protections and other financial incentives should reciprocate in kind.
It really isn’t that complicated. Or, maybe it is. In any event, I’m told that touching that third rail now and then can be uncomfortable. I’m probably about to find out how, and why. – MarPro
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Joseph Keefe is a 1980 (Deck) graduate of the Massachusetts Maritime Academy and lead commentator of MaritimeProfessional.com. Additionally, he is Editor of both Maritime Logistics Professional and MarineNews magazines. He can be reached at [email protected] or at [email protected] MaritimeProfessional.com is the largest business networking site devoted to the marine industry. Each day thousands of industry professionals around the world log on to network, connect, and communicate.